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Financial Accounting and Reporting > Miscellaneous > Flashcards

Miscellaneous Flashcards

1
Q

Miscellaneous

True or False

When translating the capital accounts of a subsidiary, the historical exchange rate is used for the capital stock account and additional paid-in capital. This date cannot be earlier than the date the parent acquired the investment in the subsidiary.

A

When translating the capital accounts of a subsidiary, the historical exchange rate is used for the capital stock account and additional paid-in capital. This date cannot be earlier than the date the parent acquired the investment in the subsidiary.

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2
Q

Miscellaneous

True or False

Because translation at the exchange rates at the dates the numerous revenues, expenses, gains, and losses are recognized is generally impractical, an appropriately weighted-average exchange rate for the period may be used to translate those elements.

A

True
Because translation at the exchange rates at the dates the numerous revenues, expenses, gains, and losses are recognized is generally impractical, an appropriately weighted-average exchange rate for the period may be used to translate those elements.

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3
Q

Miscellaneous

What are the tests to determine if an industry segment is a reportable segment?

A

Revenue test: If its revenue is 10% or more of the combined revenue of all operating segments (for purposes of this test, revenue includes both sales to external customers and intersegmental sales or transfers)

Profitability test: If the absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of:
the combined reported profit of all operating segments that did not report a loss or
the combined reported loss of all operating segments that did report a loss

Asset test: If its assets are 10% or more of the combined assets of all operating segments

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4
Q

Miscellaneous

Define Accretion expense

A

Accretion expense is the increase in an asset retirement obligation that accrues as an operating expense.

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5
Q

Miscellaneous

Define Asset Retirement Obligation

A

An asset retirement obligation is an obligation associated with the retirement of a tangible, long-lived asset, such as a nuclear power plant.

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6
Q

Miscellaneous

How should any costs of developing, maintaining, or restoring goodwill be reported on the financial statements?

A

ASB ASC 350-20-25-3 provides that any costs of developing, maintaining, or restoring goodwill should be deducted from income when incurred.

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7
Q

Miscellaneous

True or False

To be a reportable segment, the segment must report revenue, profit, and assets of 10% of the total entity.

A

False

To be a reportable segment, the segment must report revenue, profit, OR assets of 10% of the total entity. Only one of three needs to be satisfied.

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8
Q

Miscellaneous

Define Foreign Currency Transaction

A

A change in exchange rates between the functional currency and the currency in which the transaction is denominated.

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9
Q

Miscellaneous

Where do foreign currency transaction G/ L go?

A

Income Statement

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10
Q

Miscellaneous

Define Foreign Currency Translation

A

Foreign currency Translation occurs when

  1. US Corporation has a subsidiary in a foreign company
  2. Functional/ Reporting currency is the US Dollar
  3. Translation issue revolves around translating the foreign subsidiaries financial statements into the reporting currency of the parent for purposes of preparing consolidated financial statements
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11
Q

Miscellaneous

Where do foreign currency Translation G/ L go?

A

Other Comprehensive Income (OCI)

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12
Q

Miscellaneous

In Foreign Currency Translation, what rate is used when the functional currency equals the local currency?

A

Asset and Liability Translation
Use Current Rate as of Balance Sheet Date

Revenue and Expense Translation
Use the Weighted Average Exchange Rate.

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13
Q

Miscellaneous

How is impairment measured in IFRS?

A

Under IFRS, the test for and measure of an impairment loss is the excess of CARRYING VALUE above RECOVERABLE AMOUNT.

The recoverable amount is the higher of the value in use (PRESENT VALUE OF FUTURE DISCOUNTED CASH FLOWS) or NET REALIZABLE VALUE (sales proceeds less cost to sell).

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14
Q

Miscellaneous

True or False

When a class of assets’ fair value can be reliably measured, a corporation applying IFRS can elect to apply the revaluation model to the class of assets. When the carrying value of the assets differs materially from the fair value of the assets, a revaluation must occur, with any increase being included in asset revaluation surplus, an equity account, like other comprehensive income, and a decrease being accounted for as an other loss included in income from operations.

A

True

When a class of assets’ fair value can be reliably measured, a corporation applying IFRS can elect to apply the revaluation model to the class of assets. When the carrying value of the assets differs materially from the fair value of the assets, a revaluation must occur, with any increase being included in asset revaluation surplus, an equity account, like other comprehensive income, and a decrease being accounted for as an other loss included in income from operations.

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15
Q

Miscellaneous

What is the general rule for installment sales?

A

For installment sales, one must compute the gross profit percentage as a percentage of installment sales revenue for each year. The deferred gross profit for a year is the gross profit percentage for the year multiplied by the remaining uncollected installment sale receivables for the year.

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16
Q

Miscellaneous

How are detachable warrants handled?

A

Since the warrants are detachable, the proceeds from the bond issue must be ALLOCATED between the bonds (debt) and the warrants (under stockholder’s equity) on the BASIS OF FAIR MARKET VALUES.

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17
Q

Miscellaneous

What four conditions are necessary for accrual of employees’ compensation for future absences

A
  1. Rights to compensation vest or accumulate,
  2. Payment of compensation is probable,
  3. Amount of payment can be reasonably estimated
  4. The compensation is attributable to employees’ services already rendered.
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18
Q

Miscellaneous

True or False

A public entity is required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award on the date of exercise.

A

False

A public entity is required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award on the DATE OF THE GRANT.

Use grant date NOT exercise date in this situation!

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19
Q

Miscellaneous

True or False

IFRS requires goodwill to be recognized

A

False

IFRS does not require goodwill to be recognized but allows it as an option.

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20
Q

Miscellaneous

Under IFRS, a recognition of extraordinary gain as a “bargain purchase” is allowed.

A

False

Under IFRS, a recognition of extraordinary gain as a “bargain purchase” is prohibited.

21
Q

Miscellaneous

Define Functional Currency

A

Functional currency is the currency of the primary economic environment in which the entity operates or the currency in which most of the subsidiary’s transactions are denominated.

22
Q

Miscellaneous

Under GAAP rules, what are the steps in determining impairment?

A
  1. IDENTIFY the existence of such a loss by comparing the asset’s carrying amount with its UNDISCOUNTED future cash flows.
  2. Compare carrying amount with fair value to MEASURE the amount of the impairment loss.

Note that there is not an impairment loss if the fair value exceeds the carrying amount.

23
Q

Miscellaneous

What is the proper measurement of an impaired asset held for sale?

A

Lower of the fair value less costs to sell or carrying amount.

24
Q

Miscellaneous

Under IFRS rules, what are the steps in determining impairment?

A
  1. Compare NRV with DISCOUNTED future cash flows.
  2. If NRV is more than PV of discounted future cash flow, then impairment exists.
  3. Take the difference between the carrying value and the fair value to determine the AMOUNT of the impairment.
25
Q

Miscellaneous

True or False

An estimate of the effective tax rate expected for the annual period is made at the end of each interim period. This rate is used in providing for income taxes on a current year-to-date basis.

A

True

An estimate of the effective tax rate expected for the annual period is made at the end of each interim period. This rate is used in providing for income taxes on a current year-to-date basis.

26
Q

Miscellaneous

True or False

The concept of “extraordinary” items has been eliminated from GAAP; the presentation for items that are unusual in nature or occur infrequently will be expanded to include items that are both unusual in nature and infrequently occurring.

A

True

The concept of “extraordinary” items has been eliminated from GAAP; the presentation for items that are unusual in nature or occur infrequently will be expanded to include items that are both unusual in nature and infrequently occurring.

27
Q

Miscellaneous

Define Reportable Operating Segment

A

A reportable operating segment is a component of an enterprise:

a. That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same enterprise),
b. Whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and
c. For which discrete financial information is available.

28
Q

Miscellaneous

Define Defensive Interval Ratio

A

The defensive-interval ratio is a measure of time the company can survive (continue to pay operating expenses in cash) using only the quick assets (cash, marketable securities, and net accounts receivable). Thus, it is computed by dividing total quick assets by average daily cash expenditures. This is a liquidity measure, as it assesses how long a company can continue to keep up with its debts.

29
Q

Miscellaneous

What accounting alternatives can a private company use when considering the fair value intangible assets

A
  1. Assessing the nature of the difference between the carrying amount of an investment and the amount of the underlying equity in net assets of an investee when applying the equity method;
  2. Adopting fresh-start reporting
  3. Applying the acquisition method.
30
Q

Miscellaneous

Describe the pooling of interests method

A

The pooling of interest method reports acquisitions through the use of equity. The assets combined are consolidated using book value.

31
Q

Miscellaneous

Describe the tax provision for the interim period.

A

The tax provision for the interim period is the tax for the year to date (estimated effective rate for the year times YTD income) less the total tax provisions reported for previous interim periods.

32
Q

Miscellaneous

True or False

A subsequent recovery of market value should be recognized as a cost recovery in the period of increase, but never above original cost.

A

Miscellaneous

True

A subsequent recovery of market value should be recognized as a cost recovery in the period of increase, but never above original cost.

33
Q

Miscellaneous

True or False

In segment reporting, there must be enough segments reported so that at least 75% of unaffiliated revenues is shown be reportable segments (75% test)

A

Miscellaneous

True

In segment reporting, there must be enough segments reported so that at least 75% of unaffiliated revenues is shown be reportable segments (75% test)

34
Q

Miscellaneous

True or False

Credits to partners’ capital accounts are based upon earnings after allowance for interest, salary, and bonus.

A

True

Credits to partners’ capital accounts are based upon earnings after allowance for interest, salary, and bonus.

35
Q

Miscellaneous

True or False

Under the bonus method, the bonus to the new partner is charged to the old partners’ capital accounts in their profit and loss ratios.

A

Miscellaneous

True

Under the bonus method, the bonus to the new partner is charged to the old partners’ capital accounts in their profit and loss ratios.

36
Q

Miscellaneous

True or False

In a partnership liquidation, cash is distributed based on the capital balances of the partners after adjusting them for any income (loss) to the date of liquidation and any loans or advances between the partners and the partnership.

A

Miscellaneous

True

In a partnership liquidation, cash is distributed based on the capital balances of the partners after adjusting them for any income (loss) to the date of liquidation and any loans or advances between the partners and the partnership.

37
Q

Miscellaneous

True or False

The bonus method results in an increase of existing partners capital accounts, while the goodwill method results in a decrease of existing partners’ capital accounts.

A

False

The bonus method results in an DECREASE of existing partners capital accounts, while the goodwill method results in an INCREASE of existing partners’ capital accounts.

38
Q

Miscellaneous

How are balance sheet accounts handled when the functional currency of a foreign subsidiary is the foreign currency?

A

When the functional currency of a foreign subsidiary is the foreign currency, balance sheet accounts are TRANSLATED using the CURRENT exchange rate.

39
Q

Miscellaneous

How are balance sheet accounts handled when the functional currency of a foreign subsidiary is the US Dollar?

A

When the functional currency of a foreign subsidiary is the US DOLLAR, balance sheet accounts are REMEASURED using a combination of HISTORICAL and CURRENT exchange rates.

40
Q

Miscellaneous

True or False

An appropriate weighted exchange rate may be used to translate revenue/ expense items.

A

True

An appropriate weighted exchange rate may be used to translate revenue/ expense items.

41
Q

Miscellaneous

True or False

Translation adjustments resulting from the the translation of foreign currency statements should be reported separately as components of other comprehensive income, accumulated other comprehensive income, and stockholders’ equity.

A

True

Translation adjustments resulting from the the translation of foreign currency statements should be reported separately as components of other comprehensive income, accumulated other comprehensive income, and stockholders’ equity.

42
Q

Miscellaneous

True or False

A remeasurement gain or loss is included in net income, but a translation adjustment is included separately as components of other comprehensive income, accumulated other comprehensive income, and stockholders’ equity.

A

True

A REMEASUREMENT gain or loss is included in NET INCOME, but a TRANSLATION adjustment is included separately as components of other comprehensive income, accumulated other comprehensive income, and stockholders’ equity.

43
Q

Miscellaneous

True or False

Monetary balances are translated using the current exchange rate and nonmonetary balances are translated using historical exchange rates.

A

True

Monetary balances are translated using the current exchange rate and nonmonetary balances are translated using historical exchange rates.

44
Q

Miscellaneous

Describe Remeasurement

A

Remeasurement- If an entity’s books and records are not kept in its functional currency, remeasurement into the functional currency is required.

If the US Dollar is the functional currency, remeasurement into the reporting currency (the US Dollar) makes translation unnecessary.

45
Q

Miscellaneous

Describe translation adjustments

A

Translation adjustments result from the process of translating financial statements from the entity’s functional currency into the reporting currency.

46
Q

Miscellaneous

True or False

Owners equity and dividends are valued at the historical rate when it was issued.

A

True

Owners equity and dividends are valued at the historical rate when it was issued.

47
Q

Miscellaneous

Under IFRS rules, how are cash advances and loans from bank overdrafts to be classified on the statement of cash flows?

A

Operating activities

48
Q

Miscellaneous

True or False

Under IFRS rules, the completed contract method is prohibited.

A

True

Under IFRS rules, the completed contract method is prohibited.

49
Q

Miscellaneous

True or False

For IFRS purposes with miscellaneous liabilities, an agreement must be in place by the balance sheet date to exclude from current liabilities.

A

True

For IFRS purposes with miscellaneous liabilities, an agreement must be in place by the balance sheet date to exclude from current liabilities.

Financial Accounting and Reporting (15 decks)

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